Prepare to pay for electricity usage upfront as the National Treasury nudges municipalities struggling to collect revenue from non-paying consumers to install prepaid meters.
This proposed solution to Eskom’s debt problem forms part of measures intended to help the ailing power utility reduce the staggering R56bn debt owed it by municipalities at the end of December last year.
Finance minister Enoch Godongwana announced the intervention during his budget speech yesterday. Godongwana said undertaking debt relief without addressing this risk would be counter-productive.
He said they were working with Eskom to provide a solution wherein Eskom would provide incentivised relief to municipalities whose debt is unaffordable.
“To avoid a repeat of debt build-up over time, the relief will attach measures, including the installation of prepaid meters, to correct the underlying behaviour of non-payment and operational practices in these municipalities,” he said.
Gauteng municipalities alone owe Eskom R8.6bn and of this debt Emfuleni municipality in the Vaal owed R6bn.
Last month, Gauteng premier Panyaza Lesufi proposed that Soweto residents’ debt of about R5bn be written off.
In the 2023 Budget Review, Treasury said it recognised that the debt relief would not return Eskom to financial sustainability but said the recent tariff increase approved by the National Energy Regulator of SA had been considered.
“The National Treasury is finalising a proposal to address this debt. The key elements under discussion are a conditional debt write-off, legal and regulatory changes to help Eskom resolve non-payment for services, the continuation of measures to prevent debt build-up such as installation of prepaid meters, and national government initiatives to improve municipal revenue management, the Budget Review reads.
Reacting to plans around improving municipal revenue, Professor Miriam Altman of the University of Johannesburg’s College of Business and Economics said municipalities needed to sort out the debt owed to Eskom but added key to this was dealing with the culture of non-payment.
“National Treasury added R30bn to the medium-term to cover free basic services for poor households. Beyond that people should pay for what they use. Municipalities need to have capacity to recover that revenue, which they do not. There are high debt levels,” Altman said.
“Even if municipalities install prepaid meters, it doesn't solve the issue of stealing or meter-tampering or just not paying. Prepaid meters simply record but don't force people to pay. A solution to this would be for municipalities to cut people off.”
Godongwana also announced yesterday that Eskom would receive a R254bn bailout from Treasury as part of debt relief measures. Eskom has a total debt of R423bn.
He said the relief money would be used only to settle Eskoms debt and interest. Some of the conditions placed by Godongwana require Eskom to prioritise capital expenditure in transmission and distribution during the debt-relief period and focus on maintenance of the existing generation fleet to improve the availability of electricity.
Godongwana said the country had experienced record level blackouts in 2022 — 207 days of blackouts compared to 75 days in 2021.
“In response, we are acting decisively to bring additional capacity onto the grid. We are also working to transform the electricity sector to achieve energy security in the long-term,” Godongwana said.
“We announced that the government will take over a portion of Eskom’s debt. We are doing this for two reasons: firstly, doing so will ease pressure on the company’s balance sheet, enabling it to invest in transmission and distribution infrastructure. It will also allow Eskom to conduct the maintenance required to improve the availability of electricity.
“Secondly, R337bn of Eskom’s debt is already government-guaranteed. Explicitly taking on this debt will reduce fiscal risk and enhance long-term fiscal sustainability.”
As part of easing pressure on the grid, Godongwana also announced a tax incentive for households that install rooftop solar panels from March 1. He said homes would be able to claim a rebate of 25% of the cost of the panels up to a maximum of R15,000 per household. The government has set aside R4bn for this project.
Altman said the relief was not a bailout but a way of containing Eskom’s borrowing and spending.
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